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How to increase the authorized capital of a company?

  • Posted By Team Growcent
  • On 28 May 2020
  • Tag: Fundraising, Startups

Authorized share capital is basically an amount of initial capital with which the company is registered with the Registrar of Companies (RoC) and is also the maximum capital amount which the company can secure through the issue of shares to its shareholders and not beyond this amount.

Step 1: Vetting of MOA and AOA
A company must check it’s both the MOA and AOA about the limit of authorized capital. If the issue of shares or stocks is going to be beyond the specified limit in MOA, then it has to increase its authorized capital. Before increasing the company must check whether it can do so legally as per the norms of association of the company. Altering AOA is one of such option to amend such provisions

Alteration of AOA:

To alter the AOA, the company must take approval from the entire shareholder in an annual general meeting or extraordinary general meeting. Such altered AOA must be filed with MCA within 30 days from the date of resolution.

Once the AOA is altered, it can proceed with a further procedure to increase authorized capital.

Step 2: Holding Board Meeting
A board meeting must be arranged to take the approval of the board to increase the authorized share capital. Moreover, to decide the date and time to call on EGM or AGM to take the shareholder's approval. Notice for holding an EGM or AGM must be sent to all the shareholders as per the rules and regulations. A director must be fully authorized to file all the necessary forms with the MCA.

Step 3: Hold Shareholders Meeting
The company shall hold the EGM/AGM on the specified date and time to take the approval for an increase in authorized capital. An ordinary resolution must be passed in the meeting.

Step 4: Intimation to the ROC
After taking approval in shareholders meetings, a company shall draft the altered MOA to increase authorized share capital. A company has even need to intimate about the same by filing form SH-7 with the MCA. The form must be filed in 30 days from the date of resolution. The documents which are required to file the said form are as under.

  • A true certified copy of Board resolution for alteration in AOA
  • A true certified copy of Board resolution for alteration in MOA
  • Notice of AGM/EGM
  • A true certified copy of Shareholders resolution
  • Altered copy of AOA
  • Altered copy of MOA

After receiving approval from the MCA, a company shall alter its every copy of the AOA and MOA. It is necessary to incorporate changes in the MOA and AOA and put it up on the website if any.